Yesterday: Big business wins two, small business picks up one

It was a busy day yesterday for the S.C. Small Business Chamber of Commerce.  Two Senate subcommittees and the House Ways and Means Committee held meetings on legislation we supported.  Unfortunately two of these bills did not get the favorable votes we wanted.

The morning started out with a Senate subcommittee on S.145, a bill that would outlaw most favored nation clauses in contracts between health insurance companies and healthcare providers.  These contracts are used to guarantee that one carrier always gets the best provider reimbursement rates forcing the provider often to charge other insurance companies more for the same services.  The result is that other insurance companies have a harder time competing with the company that has the most favored nation clauses in their contracts.  This leads to lack of competition in our health insurance market which drives up rates for everyone.

Only two people testified at the hearing—a representative of Blue Cross, Blue Shield and myself.  The BC-BS argument against the bill was that they are a major employer in the state, they are the only domestic health insurance company in the state and that the Legislature shouldn’t do anything that would hurt even if that means allowing them to maintain uncompetitive practices. 

One Senator totally bought into that BC-BS pitch and threw the free-market and reduced insurance rates for small businesses and individuals under the bus.  The other Senator didn’t think the state should make any changes in our insurance laws until the Affordable Care Act goes into effect.

So don’t look for this bill to see the light of day again until January, 2014, if then.  Congratulations to BC-BS for having their way once again with our Legislature.

Then a Senate subcommittee met to discuss S.536, a bill that would make it legal for third parties to finance and own solar panels installed on homes and commercial buildings and sell the electricity produced to the occupant.  This practice has worked well in other states and results in the financing company to make money and the building occupant to save money.   After lengthy testimony, including mine, on the merits of allowing the free market to reign, the subcommittee voted to hold another public hearing.  The reason—they wanted to hear from the energy companies (Duke, SCE&G and Progress Energy). 

The question is why would the Senators give these companies another chance to be heard?  The energy lobbyists were sitting in the room but simply chose not to testify in public.  The answer is pretty simple.  By having another meeting probably after the Senate deals with the budget, the deadline for moving any legislation from the Senate to the House this year is lost.  Congratulations to the big utility companies for winning once again over the consumers.

But there was a ray of sunshine yesterday.  The House Ways and Means Committee voted to send H.3125, the Microenterprise Development Act, to the full House.  This bill will empower our Department of Commerce to help our non-profit microloan organizations obtain more money to lend to very small businesses (4 or less employees).

ACTION ALERT!! Health Insurance Competition

Support REAL competition between insurance companies
Contact Senators today

Senate bill 145 will receive a public hearing in a subcommittee tomorrow morning. 

This bill would prohibit a health insurance company (usually the largest) from contractually forcing healthcare providers to charge other insurance companies more for the same services.   These contract clauses are referred to as “most favored nation” clauses because they guarantee that only one insurance company gets the best rates from hospitals and doctors. 

Because of most favored nation clauses other health insurance companies can’t compete on a level playing field with the “big dog”.

This anti-competitive practice reduces the number of healthcare insurance options you have and drives up premiums 20% or more.

Contact the Senators below today with this message:

“Support REAL competition between health insurance companies.  Stop Most Favored Nation clauses by voting for S.145.”

The contact information for all these Senators can be found by clicking here.

Senators to contact:

Ronnie Cromer (subcommittee chair)
Nikki Setzler
Billy O’Dell
Tom Davis
Joel Lourie

ACT NOW to reduce your health insurance premiums. 

DEMAND REAL COMPETITION

Press Release
March 19, 2013
Contact:  Frank Knapp, 803-252-5733 (o), 803-600-6874 (m)

Small Business Chamber calls on Senate to stop protecting
Blue Cross Blue Shield

Columbia, SC—A bill originally filed in January of 2011 will finally get a public hearing in a South Carolina Senate subcommittee tomorrow.  The bill, S.145 sponsored by Senator Shane Massey (R-Edgefield), would prohibit a health insurance company (usually the largest) from contractually forcing healthcare providers to charge other insurance companies more for the same services.   These contract clauses are referred to as “most favored nation” clauses because they guarantee that only one insurance company gets the best rates from hospitals and doctors. 

“Because of most favored nation clauses other health insurance companies can’t compete on a level playing field with the ‘big dog’,” said Frank Knapp, Jr., president and CEO of the South Carolina Small Business Chamber of Commerce.  “And in this state the ‘big dog’ is Blue Cross Blue Shield—not only in having the most policies in the state but also having the power to stop this bill from even having a public hearing until now.  We are very appreciative of the new chairman of the Senate Banking and Insurance Committee for allowing this important bill to be debated in our Legislature.”

One comparative analysis between health insurance rates in counties on both sides of the South Carolina-Georgia border shows startling results.  The premiums in the South Carolina counties are on average 20 percent higher for small businesses and up to 30% higher on average for individual policies.

“If we truly believe that competition is needed to keep health insurance premiums down, then South Carolina must join about a dozen other states in outlawing most favored nation clauses,” said Knapp.  “Without real competition in the insurance industry, we might as well have government controlled health insurance.  At least then the public would have some influence over rates.”

Most Favored Nation clauses are currently being attacked in a major private lawsuit against BlueCross BlueShield of North Carolina.  In 2010 the U.S. Justice Department sued Blue Cross Blue Shield of Michigan for violating antitrust laws with most favored nation clauses.  In 2011 it became public that the Justice Department was also conducting an investigation into similar practices in South Carolina involving Blue Cross Blue Shield. 

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Refunds that almost didn't happen

By today all health insurance companies were to have notified individual policy holders and small businesses about premium refunds or credits they were due thanks to Obamacare.  In my July 18^th blog I talked about these refunds and how they could finally demonstrate to the public that healthcare reform was working to make health insurance more affordable.

Obamacare required insurance companies to spend at least 80% of premiums on medical services.  The other 20% could go toward all forms of administration including advertising, profits, taxes and CEO salaries.  If the companies didn’t reach the 80% threshold, they had to give back the difference to the policy holders thus giving consumers more bang for the health insurance premium buck.

Over 105 thousand South Carolinians will get refunds totaling $15.3 million and scores of small businesses will get a total of $4.3 million. 

Nationally 12.8 million Americans will receive over $1.1 billion in health insurance refunds.

But South Carolinians almost didn’t see any refunds. 

Back on July 15, 2010, the South Carolina Department of Insurance (DOI) asked the U.S. Department of Health & Human Services (HSS) for a waiver from the 80/20 rule.  Without any public input (but plenty from insurance companies such as Blue Cross Blue Shield of South Carolina) our Commissioner of Insurance argued that requiring carriers to spend 80% of individual policy holders’ premium dollars on medical care would be too difficult for insurance companies to comply with.  As a result, he said, some of our smaller carriers serving South Carolina might leave the state thus reducing consumer choices.  Our DOI suggested that for South Carolina the rule should be 65/35 for 2011. 

Seven states actually did get a waiver on the 80/20 rule out of the 15 that tried.  On behalf of the South Carolina Small Business Chamber I sent a letter to HHS opposing our Department of Insurance request. 

Fortunately our state’s request for the waiver was not granted.  The dire consequences that our DOI warned might happen didn’t happen.  And the biggest hunk of the $19.6 million refunds to South Carolinians will most likely come from the state’s biggest insurance company that was whispering “waiver” in our insurance commissioner’s ear, Blue Cross Blue Shield.

2012 State Legislative Wrap-Up

Numerous legislative efforts were on the South Carolina Small Business Chamber of Commerce (SCSBCC) agenda this year.  While the Legislature will make one more trip back to Columbia to address some gubernatorial budget vetoes, the die has been cast for everything else.  And because this was the second year of the two year session, what did not get done now has to start from the beginning in January.

First the bad news.

INSURANCE INDUSTRY DEFEATS CONSUMERS

Health Insurance

To really have competition between health insurance companies you have to stop allowing the dominant carrier in the state, Blue Cross Blue Shield (BCBS), from contractually forcing healthcare providers to charge BCBS competitors higher fees.  This process is called the “most favored nation” clause in a contract.

If one health insurance company is guaranteed to have the lowest reimbursement rates for doctors and hospitals, that company has lower costs and thus can be more competitive in premiums charged.  But that company also has no incentive to drive down healthcare costs.  In fact, it has an incentive to allow healthcare costs to increase thus enabling it to make more profit through higher premiums.  As a result the other healthcare companies are forced to have higher costs and thus less competitive premiums.  With no market-driven containment on healthcare costs, premiums for all health insurance companies increase.

We supported S.316 which would have outlawed most favored nation clauses in health insurance company contracts with providers.  But S.316, which was introduced in January of 2011, never even got a subcommittee assignment from the Chairman of the Senate Banking and Insurance Committee.  You can probably figure out why. 

The last reason given to me by the Chairman, who was defeated in his primary election, was that BCBS was under federal investigation for using the most favored nation clause to restrict competition thus harming the consumer.  The Chairman didn’t think it was appropriate for the state to get out in front of the feds and possibly pass a law that might have to be changed later depending on the outcome of the investigation.

I didn’t buy the logic.  While it was true that the U.S. Justice Department has been (and probably still is) looking into the contractual practices of BCBS, confirmed by a call I received from the Justice Department to discuss the matter, this was a poor excuse for not moving S.316 along the legislative process.  

First, since when does South Carolina kowtow to the federal government?  We think nothing of sticking a finger into Uncle Sam’s eye whenever it means scoring some political points.  And if we can do that for partisan reasons, surely we can do that to help make health insurance more affordable for our citizens.

Second, a federal investigation would be looking at the past behavior of BCBS.  Legislation would address future behavior.  We should have been taking action to correct uncompetitive behavior going forward and let the feds worry about the past misdeeds.

The bottom line is that because the Senate Banking and Insurance Committee failed to promote competition between health insurance companies either because of the lobbying power of BCBS or the Chairman’s reluctance to hurt the fed’s feelings, South Carolinians will still pay higher rates for the same coverage compared to Georgians and North Carolinians right across the border.

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